A Deeper Dive Into Critical Contract Terms

contract_diver​Whether big or small, every association will come across a need to hire an outside vendor. Hiring a vendor to complete any task for an association carries with it some level of risk. Typically, the bigger the project, the bigger the potential risk. Whenever a community association is hiring an outside vendor, it is important to ensure that the association is protecting its property, assets, and membership. The best means of protecting the association is to ensure that the contract is appropriate for the project and provides the necessary protections for the association.

Many vendors that an association may consider will provide a proposal for services, which the vendor intends to also operate as the contract. These will permit the association to simply sign the proposal authorizing work to be completed; however, they are typically one-sided in favor of the vendor and, more importantly, fail to include essential provisions for association contracts. It is important to consider the work or services involved in any contract and to contact appropriate legal counsel to ensure that the association is properly protected.

In addition to finding a good contractor or vendor for your association, it is just as important to ensure that you have a good contract. Many associations have found out the hard way that spending a little extra upfront to ensure you have a good contract that protects the association is well worth it to avoid drawn out contract disputes and litigation. A good contract will be tailored to the work or services being provided.

Are you protected from damages or injury? Appropriate indemnification provisions will help to ensure that the party responsible for damage or injury, likely the contractor in this context, will also be responsible for the costs of repairs or other liabilities that may arise. Appropriate insurance provisions, including worker’s compensation, general liability, automobile liability and others, will help to ensure that the association will receive compensation for any loss or damage, even if the contractor does not have sufficient funding.

Are you protected from a contractor who does not finish the job, or does shoddy work? A well-drafted contract can include appropriate provisions to enable inspections during the course of work, and a final inspection prior to the association’s final payment obligations. The ability to withhold payment from a contractor for incomplete or unacceptable work is a strong and effective motivator for a contractor.

A well-written contract will be balanced, provide a clear outline of the expectations, and will provide all of the necessary provisions to protect the association and its members. Associations are best served by seeking legal counsel at the beginning to help avoid problems before they occur, or at least to ensure that the association is protected when problems arise.